The pound was steady against the dollar, hovering near its highest level since the week of the US election, trading at $1.2933, amid hopes of a ceasefire in Ukraine, though president Donald Trump’s tariff policies continue to cap investors' risk appetite.
The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, has recovered slightly after Trump threatened to double tariffs on imports of steel and aluminium from Canada but scrapped his decision after Canada agreed to roll back a 25% surcharge levied on electricity exported to the US. At the time of writing it was up by 0.2% to 106.50.
However, the EU has announced it will impose trade “countermeasures” on €26bn (£22bn) worth of US goods, in retaliation to Donald Trump’s tariffs on steel and aluminium imports, escalating a global trade war.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "As the ‘Trump bump’ has turned into a slump, investors are bracing for fresh volatility ahead. The impact of tariffs is front of mind, given broad 25% duties on imports of steel and aluminium have come into effect, with the risk of tit-for-tat retaliation high.
"China has already responded with higher duties on American goods and the EU is planning counter tariffs, which are expected to come into force in April."
The pound was further support by news that Ukraine accepted the US’s proposal for a 30-day ceasefire with Russia. Ukraine accepted a truce proposal after eight hours of talks with US officials in Jeddah on Tuesday, with Marco Rubio, the secretary of state, saying the ball was now in Russia’s court.
Gold prices edged up on Wednesday morning, buoyed by growing demand for the precious metal as a safe haven amid escaslating trade tensions. Investors are also bracing for the latest US inflation data, which could influence the precious metal’s trajectory.
Spot gold rose 0.4% to $2,921.16 per ounce, while gold futures gained 0.1% to trade at $2,924.00.
"The sideways move in spot gold continues, with the price finding gains capped below $2,930.00, and a new support at $2,880.00 so far preventing any further downside," Chris Beauchamp, chief market analyst at IG, said.
"Tuesday’s bounce took the price back to the top of the current range, but it is currently showing little inclination to break higher."
Traders are awaiting the release of the US Consumer Price Index (CPI) data later today, which will offer key insights into the Federal Reserve's upcoming interest rate decisions. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets like gold, often driving up both demand and prices for the metal.
While the Fed has indicated that a near-term rate cut remains unlikely, policymakers are focused on inflation risks, particularly in light of recent tariff policies. The central bank's next meeting, scheduled for March 18-19, will be key in determining its stance on future interest rate moves, which should have implications for the price of gold.
Oil prices saw a rebound as global markets grappled with a mixture of economic uncertainties, including concerns about the impact of tariffs, the potential for a US recession, and the prospect of increased output from OPEC+.
Brent crude futures rose 0.4% to $69.33 per barrel, while US West Texas Intermediate (WTI) crude climbed 0.5% to $66.57 per barrel.
The rebound follows a period of market volatility largely driven by Trump’s protectionist trade policies. His administration's tariffs on major oil suppliers, including Canada and Mexico, have created ripples across global markets.
Additionally, the increase in duties on China, which prompted retaliatory measures, has added to the strain on oil prices.
Over the weekend, Trump indicated that the global economy may enter a “period of transition,” while also leaving open the possibility of a US recession, further deepening investor concerns.
Market participants are also closely monitoring developments within OPEC+, as the producer group plans to increase oil output starting in April. This decision, expected to boost global oil supply, has added to the uncertainty surrounding future price trends.
In the United States, crude oil stockpiles rose by 4.2 million barrels during the week ending March 7, according to data from the American Petroleum Institute. This increase in inventories is adding further pressure on prices, prompting investors to look ahead to official government data on US stockpiles, which is expected to be released on Wednesday, for additional trading signals.
In broader market movements, the FTSE 100 (^FTSE) was higher on Wednesday morning, up by 0.4% to 8,527.41 points at the time of writing. For more details, check our live coverage here.
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